Finance
What is private mortgage insurance (PMI), and when is it typically required for Illinois home loans?
AInsurance protecting the buyer against job loss; required on all loans
BInsurance protecting the lender against default; typically required when the down payment is less than 20%✓ Correct
CTitle insurance protecting the buyer; required on all FHA loans
DHazard insurance protecting the property; required by all lenders
Explanation
Private mortgage insurance (PMI) protects the lender (not the borrower) if the borrower defaults. It is typically required on conventional loans when the buyer makes a down payment of less than 20% of the purchase price (LTV above 80%). Under the Homeowners Protection Act, PMI must be automatically cancelled when the loan balance reaches 78% of the original purchase price. FHA loans require mortgage insurance premiums (MIP) regardless of down payment.
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